Why a 10% deposit is required to buy off-plan
Brett Alegre-WoodChairman, YPC Group
Hey guys,
One of the biggest challenges a property club face is the need for sales versus the need to fully inform clients and most of the clubs around have opted for sales over education and information.
The reason I raise this issue is that a lot of clubs in their drive to sell neglect to fully inform clients of the risks involved with exchanging on property. Yes - it is always the buyer's responsibility to perform due diligence, but many clubs assume that their clients have a much higher level of knowledge than they actually do.
The complications come once you exchange on a property as you are legally bound to complete it whether you can get a mortgage or not. Putting aside the issue of not being able to get a mortgage, the next biggest issue is arriving a completion and not having enough money to complete.
Are you interested in long term profits, passive income of £500-£1000 each month — and complete financial freedom from investing in UK properties?Sign up for my brand new, free online property course to learn the proven way to use property as a vehicle to achieve financial freedom as the recession eases and confidence grows.
This is the very same information many have paid thousands to learn! It's valued at £199 per year and each week, I'll teach you everything I've learned while building the portfolios of thousands of my clients over the last 15 years. Learn from my experience and avoid making the mistakes I made!
You'll learn all this and more in just the first 3 weeks of this course:
 Plus, a special bonus: you'll receive Brett's regular video updates, delivered straight into your inbox, where he turns on his video camera and decodes the week's property news for you!
|
Join our newsletter list for FREE today and you'll receive as a bonus a complimentary PDF copy of Brett Alegre-Wood's best-selling book The 3+1 Plan!
You'll learn the safest time-proven strategies that will guide you and grow your portfolio during any economic boom, bust, recession or downturn.The 3+1 Plan is a step-by-step guide that will show you how, with just four properties, you will be able to fund the lifestyle you have always wanted. Even before you retire! Immediately you register for our newsletter we'll send you the PDF download link for this award-winning book so you can start reading right away...
| ||||||||||||
| |||||||||||||
That's why I always have my clients put in 10% on exchange so that they know they can at least complete on the property. Let me explain:
If you invest 10% at the time of exchange you will have no problems (eg: shortage of funds) when it comes time to complete. The reason is quite simple. All funders require a minimum 15% deposit on a buy to let property. Almost all funders will allow a 5% builder's gift as part of your deposit when buying direct from the builder. So this leaves you 10% as the deposit you must find. Given this criteria it shouldn't matter when your property completes, you will be able to get a mortgage and more importantly complete on your property. That's the only proviso.
Too many times I have had people come to me having exchanged on a property with nothing down or 5% and when completion arrives they don't have the required funds and lose the property. A lot of times this is due to being sold a no money down deal which was available at the time but by the time that the property completes it is no longer available and because they have exchanged so must they complete.
This means that you haven't got 10% you possibly shouldn't exchange on it.
Brett's 85% LTV versus rent assumption
The only other factor which I have not discussed in this section is the rental achieved by the property and its effect on the amount you can borrow. My assumption and certainly my experience is that if you leverage to 85% you will be able to find a funder that will lend you the money. After all the funders want your business.
Live with passion,
Brett Wood
Reader comments for the article 'Why a 10% deposit is required to buy off-plan'
You're invited to join in the discussion of this article. Do you have advice to share? An opinion or some feedback that adds to the discussion? Feel free to add it below! (Please note though that ALL comments are checked before they're posted.)
Brett reporting from Malaysia, should we open up an office in Malaysia?
How will the Euro affect you as an investor?
Is it realistic to have cashflow positive investment property 100% of the time?
How Much Capital Do You Need To Get Started In Property Investment?
How Quickly Should An Investor Build Their Property Portfolio?
Brett reveals London's newest, still-unknown hotspots in new video